I'm carrying a 750k mortgage on a 1.2 million dollar house right now. Payments are about 5K a month with everything impounded. Here are our current stats:

Ages: 33

Status: married with no kids, but wife is pregnant

Income: 500k+ (wife is lawyer and I have my own firm so income fluxuates from 300K-800K/year)

Cash on hand: 850k

Combined retirement: 360K

Other debt: None (student loans were paid off a few years ago, no credit card debt, just a car lease for an acura RDX that is $400/month).

If I pay off the house my monthly cost for property tax/insurance/HOA fees will be about $1,800/month.

I understand it is probably a better investment to buy an income property, but we have high income and no debt, so I figure once I pay off the mortgage I could buy an income property in another year or two. Plus property prices are insane right now and I think they will correct. Also, having a paid off house at 33 with 100k in the bank and 360k in retirement seems like a good place to be.

Is your only foreseen benefit psychological? How important is that benefit to you? Being afraid of debt qua debt is very prole and causes irrational behavior. You'd be giving up a big mortage interest deduction and reducing your liquidity just to be able to go to bed thinking of the sweet prole comfort of "financial freedom"

Yes it is psychological, but not as short sighted as just thinking my house is "safe." Once the house is paid off we can live soley off my wife's income without losing any quality of life (travel, eating out, our sick house, etc). That will allow me to take significant risks with my firm to grow it more, and also allow me to put 100% of my significant income into investments without worrying what happens to that money.

it depends -- your interest rate is probably under 4% and is deductible. Can you place the money elsewhere and generate higher returns? You almost certainly could, so it doesn't make FINANCIAL sense for you to pay off your house. But it might be worth it for peace of mind.

You're not moderately risk averse, you're a fucking dumb pussy. If you have that much cash you can invest, you can basically pay your mortgage off with dividends. You're a dumbass poor if you don't know how to use leverage.

What is a better return right now? The DOW is nearly 20k and I don't see it going much higher now for a while (in fact I see it correcting). As far as real estate, as rates go up I see it getting cheaper over the next year or two.

Your mortgage is basically free money. Why would you ever pay it off. You're getting a tax deduction so really you're talking about a guaranteed under 3% return, which barely outpaces inflation. I don't do short time horizons. I don't care if the Dow is at an all time high, I'm looking at a 10-15 year time horizon at the very least so it doesn't matter to me. The market will easily return more than 3% over the long term. I don't invest in stocks, only index funds in a lazy portfolio.

This is my thought process. My home is 2.75 30 year. I have no intention of paying it off early and view that as free money. I would rather invest in bitcoin (or whatever) than pay off my house early. Debt doesn't scare me.

Your "10-15 year time horizon" is not "long term" and your starting and ending points are crucial. Over the past 30 years, you could have any number of 10-15 year periods that do really well, really shitty, and in between.

"The market will easily return more than 3% over the long term" is cold comfort to people whose 15 year period happens to end when the market has taken a big shit.

if you want to lengthen your time horizon, though, then you should be entering your risky investments earlier, not later. OP has indicated that he is going to be making risky investments, so the real issue is the sequence of those investments.

You missed the "at least" 10-15 years part. Point is that at that income level, you have the flexibility to take out money when you want when it's at a high (like now) for home renos or whatever else you want, but you can always leave it in to ride out a downturn. There is absolutely no reason to ever dip into your stock portfolio because you need cash to live. You only need a $100k cash cushion in case one person becomes unemployed. A $5k/month mortgage is very manageable.

You're thinking too short term. A low interest mortgage in a high property value area (which I assume you are) is really the only low risk way to be leveraged over a long time frame. Don't give it up for some "peace of mind." Look I am conservative too with money, but not that conservative to the point where I don't do what makes economic sense.

I Iive in the same market as you with same size mortgage and similar income and one kid and likely another in the next few years. We save btwn $200-250k/year not counting 401k. There's never been a reason for us to take out money from the stock market. We have a year's worth of living expenses but there no chance either of us would ever be unemployed for that long anyway. Maybe six months. Frankly, a mortgage of this size is playing it ultra safe. Don't pay off the mortgage. Use that money for the kid's 529, stock market, RE investments etc. you pay off the mortgage now and it will take about 3 years to save up to that level again. You can miss a lot of opportunities during that time. A super low interest mortgage is the best way for you be leveraged.

Pay-off mortgage, find local bank to loan you back 50%-70% of the home's value at a fraction of your current rate due to you having 100% equity (this matters). Put the loaned cash in an LLC. Invest in local RE, profit...

If the current market value of your property is worth at least 2 percent more than when you bought it (adjust for inflation), then you're better off hiring a realtor to SELL your property so that you take advantage of the increase in property value. Use that extra money to buy another place.

If you can sell right now and buy during Oct-Dec you can earn at least $100k in profit.

With transactional costs I would not net much. Also, I plan on raising my kids in this house so I don't want to sell it. It is where I want to live. Finally, 100k in profit is nothing relative to my existing income and not worth the hassel. I could just settle a few cases and make that much without selling the house I love.

I have a brokers license. There are still broker fees on the selling side plus closing costs. Plus the transactional costs of whatever I buy next. Also, we made 800k in 2016. Making a couple hundred grand even, is not going to materially impact my life.

It depends on your future plans with respect to your career and your discipline for saving and investing. It's also worth considering what extent your employment is "diversified" from the economy at large (i.e., if you invest the money in an index fund and it craters on account of a bad economy, are you at risk of losing your job).

The economic benefits of maintaining a home mortgage are well-known and covered above. However, the advantages of freeing up cash-flow, from both a psychological and entrepreneurial perspective, are often overlooked.

My employment has nothing to do with the economy. I do personal injury mostly and people get in car accidents regardless of the economy. Also, I am free to hire since it is contingency, so there are no financial hurdles for client's to hire me.

As I started earlier in the thread. My main reason is to put my wife and I in a position where her income is enough to cover all of our needs. Then if I make 300k-800k/year, all of that money can be used to invest in real estate/stocks/bonds/etfs/etc. Also, I could then hire some more staff and try to grow my business more without feeling like I could be killing a business that is working.

I have put a lot of thought into structuring my finances to accommodate your situation. Given your somewhat unique circumstances, almost all of the standard advice is inapplicable to you. All of your personal financial decisions need to be made from the perspective of maximizing the growth of your practice while maintaining as many future options as possible.

I assume you are already a partner in your firm given the dollar amounts you are discussing. The credited course of action will depend significantly on the current capitalization of your firm, your portfolio of cases, and your likely expenses in the short and medium term to work up your cases. It is also a really good idea for people in your position to focus on minimizing fixed, periodic cash outflows so you don't stress during the lean times, but it will be of little personal benefit for you to eliminate a monthly mortgage payment if your partner(s) can't do the same since you will want to avoid the development of a significant imbalance of your respective capital accounts, which almost invariably results in the firm breaking up.

Last, and perhaps most importantly, you should give significant consideration to what is considered to be standard practice in your local plaintiff's bar for capitalizing and financing plaintiff's firms. It is usually best if all partners have similar financing arrangements (i.e., similar amounts of cash contributed and similar types of personal assets pledged as collateral), which helps to minimize the possibility of future disagreements with respect to disbursements and servicing of firm debts.

That's a bit absurd. If I have no mortgage 100k could last us 2 years of both not working. On top of that, if she lost her job she would get unemployment and even my firm in a terrible year would make a couple hundred grand. No way she doesn't find another job in 6mon-1 year.

I think that is a strong psychological place to be without sacrificing the tax efficiencies discussed earlier and your low, fixed rate while leaving you open to other options and cushioned with more significant liquidity.

From there you have 700k cash so maybe buy a 400K piece of RE that has a 8-10% cap rate all cash, so thats a couple of grand net of management per month in the mail which can theoretically reduce your monthly nut materially. Maybe get a line on the building from a bank you want to develop a long term relationship with but you dont use it.

Then maybe put the remaining 300k somewhere in a few HY CD's for a year or so and chill/see what develops, dont let it burn a hole in your pocket